An uncertain economic forecast is driving law firms to take a hard look at one of their largest expenses: real estate. Given that Florida continues to be a landlord market, law firms must overcome more challenges than ever to negotiate the best possible lease rates and terms.
JLL’s 2016 U.S. Law Firm Real Estate report surveyed all major national and local submarket trends to identity the key trends influencing law firm office leasing. We dug into the findings to share the top information for Florida’s law firms:
Slower economic forecasts leading to better deals
While the U.S. economy has remained relatively stable despite global economic uncertainty, growth projections are beginning to taper off. AmLaw 100 law firms saw an aggregate increase in gross revenue of 2.7 percent in 2015, the slowest rate since the recession. Last year also saw a slowdown in the price for partner and revenue per lawyer growth.
The silver lining is that law isn’t the only industry being impacted. A slowdown could provide firms greater negotiating leverage over the next 24 months.
Gone are the 1,000 square foot corner offices with the window view and the extensive office libraries. Today’s law offices are occupying less space and putting the emphasis on gathering areas such as cafés and open work areas that are conducive to collaboration and idea sharing.
Reassessing team needs and utilization of the office space may help a firm maximize efficiencies and yield cost savings that surpass 20 percent.
Florida’s tightening market
Throughout the State, demand for office space is outpacing supply. Larger law firms are often looking at new construction to fill their needs for new and modern office options. For example, earlier this year in Miami, Swire Properties scratched its plan for a wellness center in its newly built Three Brickell City Centre and leased 82 percent of the 134,552-square-foot building to law firm Akerman LLP.
Moving to the ‘burbs
As a decrease in available office space drives up prices, cost-conscience law firms are looking outside of the much sought-after urban cores. In Orlando for example, firms with smaller footprints can lower real estate prices by 11 percent by moving out of downtown and into prime suburban markets.
Florida’s limited commercial development pipeline is expected to reduce opportunities over the next few years. This challenge creates the need for firms to enter the negotiation process early on. A three- to four-year outlook will secure the time necessary to vet office space options and build best-in-class deal terms that meet a firm’s short- and long-term objectives.
About the Authors
Don rejoined JLL in 2011 as Senior Vice President when the firm retained the leasing and management for Southeast Financial Center, the largest office tower leased and managed by JLL in the Southeast. Contact Don.
Nick Poole, Executive Vice President
Nick Poole specializes in tenant advisory services and economic incentive negotiations for local, regional and national clients. His responsibilities include new business development, lease and contract negotiation, cash flow analysis and execution of real estate transactions for office and industrial user-owned or leased locations. Contact Nick.